A two-equation model below represents goods sector and monetary sector equilibrium for a hypothetical economy 1.Y=i 0 /1-c+b/1-c.r i 0 >0,b <0, 0 0, f

A two-equation model below represents goods sector and monetary sector equilibrium for a

hypothetical economy

1.Y=i₀/1-c+b/1-c.r i₀>0,b<0, 0

2.Y=i₀-e/f-g/f.r L_o>0, f<0, g<0, e>0.

As usual, is aggregate income,is the interest rate,₀ is the autonomous investment, and₀ is the level of money supply.

i) Which equation represents the IS and which represents the LM

ii) Justify your answers found in i).

iii) Find the equilibrium of the economy